Press Conference in connection with the launch of

World Investment Report 2006: FDI from Developing and Transition Economies:

Implications for DevelopmentPresentation by

Professor Tagi Sagafi-nejadTexas A&M International University

On behalf of the United Nations Conference on Trade and Development (UNCTAD)

Mexico City, October 16, 2006

History of WIRs

The annual series began in 1991 under UNCTC Have been published annually under UNCTAD

since 1993, with rave reviews every year Most authoritative source on foreign direct

investment (FDI) and Transnational Corporations (TNCs)

Scholars gather to review drafts and give feedback to UNCTAD

For last 2 years, regional workshops have been held in Mexico

Global Trends

Top Five developed countries account for under 50% of FDI inflows (down from 70% in 1980

Top Five developing countries account for less than 20% (Chart p, 4)

Global Trends (cont)

Liberalization of FDI regimes continues Regulatory changes favorable to FDI are four

times as high as those less favorable However, the downward trend seems to have

reversed (3, 14, 12, 24, 36, 41 unfavorable changes between 2000 and 2006)

Table p. 24)

Regional trends

Developed countries continued to account for the bulk of FDI outflows

South, East and South-East Asian economies remained the largest recipients among developing countries

About two-thirds went to China ($72bill) and Hong Kong ($36bill)

Regional trends

Latin America and the Caribbean saw only a 3% increase, a much lower growth rate than in 2004

Yet the amounts were substantial Brazil, Chile and Mexico witnessed

decreases in FDI inflow

Developing Countries

Developing countries, as sources of FDI outflows, strengthened their global position in 2005, investing US$117 billion.

Latin America: Disturbing signs

Move toward a greater economic role for the State shifts in Government policies that directly concern

foreign investors or industries The case of natural resources sector In Bolivia, the Government decreed the

nationalization of hydrocarbon resources and required foreign TNCs to sign new concession contracts.

In Venezuela the Government took control of 32 oilfields previously under foreign operation.

Trends in Latin America

FDI Potential vs. Performance

A new index, since 2000 Measures ability of a country to absorb FDI

and the amount it actually receives Table p. 24 See matrix

FDI Potential vs. FDI Performance Front-runners (Chile, T&T) Below potential (Argentina, Brazil, Mexico) Above potential (Bolivia, Costa Rica, Ecuador, Jamaica) Under-performers (Colombia, El Salvador, Guatemala,

Venezuela

Outward FDI from Developing Countries Why?

Globalization Sign of economic maturity Becoming more competitive Good for home country

Universe of Third World TNCs is growing But limited to a few countries

South-South FDI

From $4 bill. in 1985 to $61 bill. in 2004 (15-fold increase!)

Some $48 billion (78%) is inter-Asian In Latin America, Argentina, Brazil and

Mexico accounted for most of the $2.7 bill.

Third World TNCs

Universe is growing Ten from Mexico (largest number in Latin

America) Two from Brazil

See Table P. 283 Driving forces

Push factors Pull Factors

Push factors

Rising costs at home

Bi-pass trade barriers

Competitive pressures

Political push

Conclusions

Globalization is the main driver of the process Sources of FDI are diversifying The nature of the TNC as a global entity is

changing But not all TNCs are driven by the same

forces Overall, the near term prospect is optimistic,

but in the long run,……….?

Thank you!